March Madness grips the market again. Ardent fans are gearing up to cheer their favorite basketball team and brackets are made. The annual National Collegiate Athletic Association (NCAA) tournament is quite a challenge for sports analysts when it comes to predicting the winner. Picking the right stocks is equally dicey as investors might either win big or lose all.
The frenzy of the March Madness hits all, compelling investors to keep an eye on stock market movements. In fact, historically, March Madness tournaments mostly concur with strong stock gains.
We are also in the middle of a nine-year bull run that is backed by business-friendly tax cut policies and solid economic growth at home and abroad. Investors have also breathed a sigh of relief after the recent trade war fears on Trump's tariffs plan somewhat eased, while the current ouster of Secretary of State Rex Tillerson is nothing but a temporary blip.
As the broader trend remains positive, it will be prudent to bet on fundamentally sound companies that could make the most of the March Madness.
March Madness Keeps Sports & Market Analysts on Toes
Most of the Americans will agree that March Madness is an electrifying phenomenon that dominates national sports starting the second week of March through the first week of April. March Madness is basically a name given to the NCAA men's and women's basketball tournaments, which determines the national champions of college basketball. Around 68 men's teams and 64 women's teams will be participating. This tournament is so popular that more number of Americans are expected to fill the tournament bracket than those who have voted for President Trump last year.
March Madness, of course, is a huge revenue-generator for the NCAA. As per the American Gaming Association, Americans are expected to gamble a staggering $10 billion on the tournament this year, which almost matches the GDP of countries like Armenia, Malta and Namibia. Most of the bets, however, will happen under the table. Only 3% of the betting is expected to be legal.
Predicting the tournament is so hard that billionaire Warren Buffett is willing to offer an astronomical prize to any employee who can pick all Sweet 16 teams. The employee will be given a sum of $1 million per year for the rest of his or her life. Thus, the human reasoning used in the tournament's decision making process has many comparisons to that of investing in the stock market. Like sports analysts who seem confident enough to pick the winning team from the NCAA tournament, market pundits claim that they can pick the stocks that will outdo the broader market. In fact, the NCAA tournament, historically, have put Wall Street in a buying mood.
March Madness Concurs With Solid Stock Gains
The U.S. stock market posted encouraging results in the last March Madness. The Dow Jones Industrials Average has risen in nine of the past 12 times, while the S&P 500 rallied in 10 of the trailing 12 tournaments. Lest we forget, March rings in more positive returns for the S&P 500. The average monthly return in March from 2007 to 2016 has been 2.7%, the best monthly performance in a year on an average-return basis.
The tech-laden Nasdaq Composite Index has also been up in nine of the past 12 tournaments, while the Russell 2000 index, that represents the smaller companies in the U.S. stock market, went up in nine of the past 12 years. To top it, the tournament enters the month of April, which is traditionally the second best performing month of the year.
Bull Market Turns 9, Investors Cheer Global Economic Growth
The broader markets, in the meantime, have scaled new highs on the latest Republican tax cuts and robust economic growth at home and abroad. On Mar 9, the U.S. stock market celebrated its ninth anniversary of the bull run.
Trump's polices including tax cuts, repealing regulations and increased infrastructure outlays restored expectations of a pro-growth agenda that helped the broader market push further into record territory.
Trump's economy also started 2017 on a stellar note. The U.S. economy expanded at a seasonally adjusted annual rate of 2.3% last year, marking the best growth in two years. Also, Americans are getting fatter paychecks, with wages growing at the quickest pace since the end of the last decade
But, there is another major factor behind the strong American growth. It's the global economic growth, with every major country from China to Europe and Latin America to Japan expanding at a healthy pace. According to the International Monetary Fund, the global economy expanded at a rate of 3.7% last year, the fastest since 2010.
March Madness Puts Wall Street on a Buying Spree: 5 Gainers
Like sports analysts are betting on winners from the NCAA tournament, investors are looking for stocks that are likely to scale higher. Hence, it makes sense to invest in some rock-solid stocks that could make the most of the market bullishness.
For that to happen, Zacks Rank #1 (Strong Buy) stocks will be the best choice. The stocks also boost a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum, and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners.
Builders FirstSource, Inc.BLDR manufactures and supplies building materials, manufactured components, and construction services. The Zacks Consensus Estimate for its current-year earnings moved up 16.2% in the last 60 days. The company's expected growth rate for the current and next quarters is 45.5% and 40.9%, respectively. Builders FirstSource outperformed the industry in the last one-year period (+44.8% vs. +16%).
Centene CorporationCNC operates as a diversified and multi-national healthcare enterprise. The Zacks Consensus Estimate for its current-year earnings rose 21.9% in the last 60 days. The company's expected growth rate for the current and next quarters is 67.9% and 40.6%, respectively. Centene outperformed the industry in the past year (+50.7% vs. +32.9%).
Conn's, Inc.CONN operates as a specialty retailer of durable consumer goods and related services. The Zacks Consensus Estimate for its current-year earnings climbed 22% in the last 90 days. The company's expected growth rate for both the current and next quarters is more than 100%. Conn's outperformed the industry in the past year (+312.4% vs. +54.6%). You can see the complete list of today's Zacks #1 Rank stocks here.
CRA International, Inc.CRAI provides economic, financial, and management consulting services. The Zacks Consensus Estimate for its current-year earnings moved up 19.4% in the last 60 days. The company's expected growth rate for the current and next quarters is 51.5% and 12.6%, respectively. CRA International outperformed the industry in a year's time (+44.8% vs. +26.5%).
Louisiana-Pacific CorporationLPX manufactures building products, primarily for use in new home construction, repair and remodeling, and outdoor structures. The Zacks Consensus Estimate for its current-year earnings increased 36.6% in the last 60 days. The company's expected growth rate for the current and next quarters is 93.9% and 13.7%, respectively. Louisiana-Pacific outperformed the industry in the past year (+20.9% vs. +14.4%).
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion - more than a 3,800% increase in the previous 12 months. They're now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportBuilders FirstSource, Inc. (BLDR): Free Stock Analysis ReportLouisiana-Pacific Corporation (LPX): Free Stock Analysis ReportCentene Corporation (CNC): Free Stock Analysis ReportConn's, Inc. (CONN): Free Stock Analysis ReportCRA International,Inc. (CRAI): Free Stock Analysis ReportTo read this article on Zacks.com click here.